PBF expects strong Q2 results on reduced planned refinery downtime

PBF Energy reported strong Q1 results despite planned and unplanned outages at several of its refineries as tight global supply-demand balances supported higher refining margins, the company said in its Q1 results call on April 28.

"Strength in global product prices is being driven by a combination of increased demand and low product inventories. Global refining capacity is more than 4 million barrels lower today than in 2019," said PBF CEO Tom Nimbley on the call.

"Even with relatively high utilization, current refining capacity can barely keep up with demand and is incapable of concurrently increasing global product inventories. US refining utilization is operating at near capacity as we are about to enter the traditionally peak summer demand period," he added.

PBF is well positioned to take advantage of rising Q2 margins and cracks, and expects less planned work to increase total system Q2 refinery runs to between 890,000 b/d and 950,000 b/d compared with 844,300 b/d in Q1.

Lower Q2 planned work

After a heavy spate of downtime in Q1, planned work in Q2 is confined to the 58,500 b/d reformer and secondary units at the 171,000 b/d Delaware City, Delaware, refinery which began in March and will be finished in April, and work at the 160,000 b/d Torrance, California, refinery expected to begin in June.

The restart of Delaware City will give PBF higher margin capture. US Atlantic Coast cracking margins for Arab Light are averaging $30.39/b so far in Q2, above the Q1 average of $13.81, according to data from S&P Global Commodity Insights.

Restart of the reformer will allow PBF to capture some of the high octane spread which is averaging almost 30 cents/gal in Q2, compared with the almost 18 cents/gal in Q1, Platts price assessments from S&P Global show.

Despite USAC gasoline stocks falling to seven-year lows of 50.7 million barrels, PBF has no plans to restart an idled crude unit and gasoline-making fluid catalytic cracking unit at its Paulsboro, NJ, refinery.

PBF had already restarted Paulsboro's reformer and distillate hydrotreater -- which makes ULSD -- which were shut during the coronavirus pandemic. It is unlikely to bring back a 60,000 b/d crude unit and FCC unit with a capacity "just north of 55,000 b/d" due to lack of feedstock, Nimbley said.

"The fact is because of the problems with Russia and their exports, we're likely to get some tightness in secondary feeds, i.e. VGO, fuel oils that normally feed the cat cracker," he said.

"So the fact is that we've started up what we could start up," he added.

Gasoline vs diesel dilemma

However, due to high Q1 refinery downtime, PBF has been able to build up inventories of feedstocks, and are looking to Latin America and others for sourcing feedstocks going forward.

Record-high distillate cracks have refiners "doing everything in their power to turn every drop of gasoline into a gallon of jet fuel or diesel because of the current marketplace," Nimbley said, adding that the US had become the marginal supplier of the ULSD export barrel in the wake of Russian cutbacks.

So far in Q2, USGC refiners are capturing ULSD cracks to Dated Brent of about $60/b, with jet cracks not far behind at about $52/b. Gasoline cracks are lagging at about $24/b, Platts assessments showed.

In Q1, PBF reported 34% distillate yield, but that could change if gasoline prices continue to rise.

"If the arbitrage [between gasoline and distillates] closes in, or... the product prices are narrower, then that shift will happen and you'll start unmaking distillate and making gasoline," he said.

Chalmette renewable diesel project

PBF Energy's 20,000 b/d renewable diesel project at its Chalmette, Louisiana, refinery is expected to start up in the first half of 2023, with "full pretreatment capabilities," said Matt Lucey, PBF's president.

PBF is still evaluating financing alternatives for the facility, Lucey said, and said "interest has been robust from the interested parties."

Lucey expects no problem securing feedstock for the project, even as supplies of soybean oil and other renewable feedstocks tighten, because the plant will start up with pretreatment capabilities which allow it to "maintain full optionality," he said.

"Predicting what feedstocks will be in a year's time is probably a fool's errand. But we are going to make sure we have maximum flexibility to process whatever is most economic at any given time," he added.